Market Musings 070725: Silver and platinum wake up
Market Musings 070725: Silver and platinum wake up
Report:
Investment Strategy Focus June 2025
The bond market is the final arbiter (click link to read)
Podcast:
The 5% from 12-month highs system (click link to listen)
In this podcast, Edmund Shing, Global Chief Investment Officer, BNP Paribas Wealth Management, explains a simple investing system that investors can execute themselves on a monthly basis and which has very encouraging long-term results.
Macro/Strategy: 5 key points this week
Bond investors demand higher ultra-long term bond yields to compensate for higher risk from bigger budget deficits (more spending than tax revenue). US 30-year Treasury bond yield exceeds 5% for the first time since mid-2007 as Trump’s “Big Beautiful bill” is debated in the US Senate..
The US dollar threatens to fall further, particularly against the euro (around $1.14) and GBP sterling ($1.35). Foreign investors are starting to repatriate capital from US assets back home, especially in Europe. This is driving marginal selling of US stocks and bonds in favour of European stocks and bonds.
European Central Bank lowers benchmark interest rate to 2.0% as inflation trends lower towards the ECB’s 2% target, supporting housing demand in variable interest rate-sensitive markets such as Spain, Portugal and the Netherlands. The Bank of England should also lower the BoE base rate in due course (currently 4.25%, expect 2x 0.25% rate cu5ts this year).
Precious metals momentum switches to silver and platinum: gold stalls above $3300/ounce, but silver breaks out in a catch-up move to $36/ounce (highest since early 2012) and platinum finally moves higher to $1168/ounce. Other platinum group metals like rhodium also move higher. Remember that both silver and platinum markets remain in a supply-demand deficit state, with growing demand but mining supply that is not keeping pace.
Recession, what recession? In the US, employment data remains relatively solid. Moreover, US cyclical sectors such as Industrials (XLI) and Mining (XME) continue to show strong upwards momentum. Not something you would expect to see in the face of an economic recession.
My focus this week: Dividend ETFs, Silver and Platinum Miners
UK and European dividend-focused funds and ETFs continue to hit new year highs this week, as more value-focused strategies outperform.
In Europe, the MSCI Europe Dividend ETF hit a new year high (+12% for the year including dividends, in euros) and in the UK the UK Dividend ETF also hit a new high (+14% in GBP ex dividends). Note that they still offer generous dividend yields at over 5% for the MSCI Europe High Dividend Index and 5% for the FTSE UK Dividend+ index.
In Europe, this dividend and value factor performance is centred in Banks - Eurozone Banks continue to outperform at +46% including dividends so far this year. In the UK, banks such as NatWest lead the way (+32% so far in 2025).
I continue to favour the value style and the Banks sector in Europe and the UK for now.
However, silver and platinum miners are my focus for the moment, given that both silver and platinum are finally catching up to the very strong momentum of gold so far this year (+26%), with silver and platinum miners also starting th catch up to the impressive performance of gold miners this year (GDX +52% in USD this year).
The big story for the miners is two-fold: firstly the mining companies are benefiting from profit margins that are expanding very quickly given the sharp rise in precious metals prices, boosting sales and margins as costs are not rising nearly as quickly.
Secondly, for the junior miners sentiment is improving as merger & acquisition activity hots up, with larger miners using this improved cash flow to buy up and consolidate smaller cheaper miners, rather than develop new mines.
Charts of the Week
US 30-year bond yield back at 5%
Silver and platinum move higher
US Industrials sector hits a new high
Europe and UK Dividend ETFs perform well
Silver and platinum miners react to higher metals prices
But silver miners still a long way from their 2011 peak
All the best
Edmund
Disclaimer
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17 comments
Valterra Platinum (LON:VALT) is a fair % of world supply - a recent spin out of Anglo American Anglo American (LON:AAL) so certainly sensitive to price of platinum . recently floated… appeared on LSE June 2nd… no idea if a good investment has average stocko metrics quality over value… but it is SA mining so xtra risk…. Feels similar situation as thungela Thungela Resources (LON:TGA) big S.A single resource miner separated from larger parent.
Hi does anyone know the ticker for the UK dividend ETF referred to in this article ?
Thanks
Andy
Isn't it IUKD?
Thanks Peter that looks like the one.
A wealth of information, Edmund. Thank you so much.
Silver has had a supply deficit of over 800 million ounces over the last 4 years. The 2025 deficit is forecast to be roughly 200 m ounces. Annual mining production is 800 million ounces. So the deficit is large. It takes 20 years to get a new mine up and running, so these deficits are expected to continue for years into the future.
Against this the bullion banks have large short positions and do not want the price of silver to rise. In the short term they may be able to suppress the price of silver, but eventually it has to rise based on supply / demand dynamics.
Silver is still very cheap compared to gold. Per ounce gold is about 92x the price of silver, the recent average ratio was about 75x. The current price of silver of $36 per ounce is low compared to the last high in 2011 of $50.
Silver and silver miners have a long way to go, but beware the market is very volatile due to market manipulation.
Sylvania Platinum (LON:SLP) ok the move. Up 45% in past month. 14.5% in past week. New mine coming online.
Yes I am a big fan of SLP too!
Edmund
Not sure of the attraction of Sylvania Platinum (LON:SLP) forward PER of 14 is not cheap. Of course if platinum shoots up then no problem. But what are the prospects for platinum?
Berenberg began coverage on Sylvania Platinum (SLP:LN) shares with a Buy rating and set a price target of GBP0.85. The firm highlighted the company’s stable business model and potential for share price outperformance due to favorable platinum prices.
Berenberg raises Sylvania Platinum price target to 97 (85) pence - 'buy'
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Another excellent article Edmund. In your binary system which US Govt Bonds are selected?
In my binary system
If we follow the original model proposed by Meg Faber, this would be 10 year Treasuries.
however for preference, I would use TIPS (inflation protected bonds) as they have shown better performance over time, and give the bond holder protection against higher inflation rates). I think Meb Faber stuck to 10y bonds partly to get a longer history for the purpose of back testing the system over a longer period.
edmund
Thank you Edmund.
Been posting a bit about the PGMs on X over the past few weeks especially on Sylvania Platinum (LON:SLP) Tharisa (LON:THS) - platinum broke-out in May post and as you say, silver broke above the $35 to new 13 year highs
a few of plots from some of my work (runprofits.com) which correlates moves in Commodities to names in the LSE
For the PGMs platinum is up 20.4% on the month, palladium 9% , Rhodium 8%
On the right is a plot of the %price moves weekly and monthly in UK PGM miners (relative price momentum) led by Sylvania Platinum (LON:SLP) with Tharisa (LON:THS) in second Jubilee Metals (LON:JLP) and Future Metals NL (LON:FME) (palladium)
Below a fag packet rationale for these based on Perplexity analysis of %PGMs as a correlate - worth noting that Tharisa (LON:THS) is showing a strong run-up owing to new buyback initiative and it goes x div next week
for Silver +11% Monthly
Fresnillo (LON:FRES) Anglo Asian Mining (LON:AAZ) Hochschild Mining (LON:HOC) are the standout mom players
Rare Earths and Industrial Metals
rare earths and other industrial metals are also on the move especially neodymium, molybdenum , copper with correlated moves in UK resource names Pensana (LON:PRE) Rainbow Rare Earths (LON:RBW)
on a YTD basis
Cobalt is +39% with platinum now in second +31% and rhodium +27% beating gold +25%
Much being written about how silver must catch up with gold on an historical ratio basis: but over 50% of silver's use is industrial. There's an argument that gold needs to drop even as silver rises which would reflect a more benevolent macro
I was listening to the recording of the IMC presentation by the two managers of the Golden Prospect Precious Metals (LON:GPM) investment trust yesterday and their view on silver miners was that the valuations were high compared to the gold miners. On platinum I think they were positive on the miners, but were still holding back a bit for now before increasing exposure. Their current exposure is 7.9% silver and only 1.6% platinum vs 88.5% for gold (see chart at 7 mins 50 in video).
https://youtu.be/mLa8a_QEQgE?si=xKEd1vAG-am5g9Rn
Just a small point, it's 070625 not 070725 today.